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Vinci Targets Further Airport Stakes on Construction Unit Woes

Francois de Beaupuy

February 6, 2013, 10:28 AM EST

Vinci SA, Europe’s biggest builder, is looking to buy stakes in more airports to benefit from growing travel traffic and counter a slowdown at its French highways and eastern Europe construction units.

“We will show interest in other airports, though probably not through a full consolidation as we must pay attention to our debt,” Chief Executive Officer Xavier Huillard said at a press conference in Paris today. “We may share the burden” with partners, he said.

The French builder, which manages highways in its home market, is seeking to expand in railroads and airports to generate more predictable revenue streams, use its engineering and renovation capabilities, and reduce dependence on its domestic construction businesses. In December, Vinci agreed to buy Portuguese airport operator ANA-Aeroportos de Portugal SA for 3.1 billion euros ($4.2 billion) as travel to Latin America and some African destinations is rising.

Vinci’s sales may stagnate this year, the company said yesterday after the market closed. There may be lower traffic for its French highways because of rising unemployment, while infrastructure orders from cash-strapped European governments and utilities may fall, it said.

The stock dropped 3.3 percent to 35.36 euros at 3:51 p.m. in Paris trading, giving the company at market value of 20.4 billion euros, and bringing its drop to 5 percent in 12 months. The French benchmark CAC 40 Index gained 6.1 percent in the same period.

‘Active Phase’

Huillard today predicted there will be acquisition opportunities as “the airport world is in a very active phase.”

Hochtief AG, Germany’s largest construction company, has said it will sell its airport business, which has stakes in six airports serving cities including Hamburg, Sydney and Budapest.

Traffic at Vinci’s airports unit climbed by 12 percent in 2012, led by an 18 percent gain at its Cambodian airports. Traffic at Vinci’s airport in Nantes, western France, climbed by 12 percent as the company lured a new airline, Huillard said.

Vinci is also looking at Brazilian airports among others, Louis-Roch Burgard, CEO of Vinci Concessions, told journalists today. The French company won’t have time to bid for them if sales processes start too early this year because Vinci will be dealing with the purchase of ANA, he said.

Higher Fees

The Portuguese airport operator had about 206 million euros in earnings before interest, taxes, depreciation and amortization in 2012, according to a Vinci presentation.

The increases in airline fees paid to ANA are “set in stone for the next 15 years in a very clear manner,” Burgard said. Traffic at Portuguese airports has resisted “very well to the severe crisis that has struck Portugal in the past four years,” Huillard said.

The signing of the 50-year concession contract for ANA should occur in coming weeks, and the closing should take place in the middle of 2013, the Vinci CEO said. Portuguese airports require “relatively modest investments over the next 15 years,” he added.

Vinci wouldn’t have bought ANA if it had endangered the company’s credit rating, the CEO said.

“The group is expecting business to be flat in 2013, before taking ANA or any other new acquisitions into account,” Huillard said. He said margins at Vinci’s highways may rise “slightly” and declined to make a profitability forecast for the whole company because there are “too many uncertainties.”